• We have seen another lacklustre day punctuated by news from Egypt that GASC has once again secured further wheat supplies, this time for first half Dec ’13 shipment. The tender was awarded to Romania (again) for 60,000 mt, and France (for the first time this season) managed to secure 180,000 mt. This latest foray into the market brings the Egyptian purchases by GASC to just over 2.5 million mt, which is around half of their projected total. Egypt as a whole is expected to purchase about 10 million mt, GASC account for half (or a touch over) of this amount.

• The Egyptian news was sufficient to provide some support to the wheat market as both corn and soybean prices looked to be suffering from a post WASDE hangover! The short covering spree, which provided immediate support following release of the USDA’s latest report, appears to be done and the market is now seeking direction.

• We are aware of the imminent release of the result of India’s first wheat export tender after the $40 reduction in floor price to $260/mt. Observers will watch with interest to see whether, or not, this will mark a new and serious exporter with substantial stocks to move prior to next harvest (Mar ’14) – the market impact will no doubt follow swiftly.

• Brussels maintained the export pace with export certificates totalling 663,609 mt granted this week. The season total now stands at 10.538 million mt, which is 3.323 million mt (46.1%) ahead of last year. We are 20 weeks into the season, and a simple mathematical projection to 52 weeks would show an annual export total of 27.4 million mt if the pace so far was maintained.

• Looking back, maybe today wasn’t as lacklustre as we firs thought! As we approach the close in Chicago wheat, corn and soybean markets are (just) tipping into negative territory.

• Today has seen another relatively quiet trading session with little in the way of fresh information to spark activity. CBOT grains and soybean complex have traded either side of unchanged.

• The US corn crop is 84%harvested vs. 73% last week and above the five year average of 79%. Soybeans are 91% harvested vs. 86% last week and just below the five year average of 92%. The US winter wheat crop is rated 65% good/excellent vs. 63% last week and is reported as 95% planted vs. 91% last week and 2% above the five year average. The wheat crop is moving towards its dormancy period in the best condition seen for about five years giving hope for an excellent harvest next year.

• Stratégie Grains have issued their latest EU grains update in which they project the 2014/15 soft wheat acreage to increase by close to 1 million ha to 24.1 million ha, principally driven by the attractive gross margin compared with other crops. Barley acres are also forecast to fall by as much as 0.5 million ha due to reduced spring plantings. 2013/14 total grains output for the EU 28 was forecast a touch lower than last month’s estimate at 301.5 million mt. This compare with 278.5 million mt in 2012/13. The EU soft wheat figure for 2013/14 was revised down vs. last month at 134.9 million mt and com pares with 125.5 million mt in 2012/13. The report also drew attention to the growing attractiveness, based on cost, of maize in animal feed diets.

• Key news today has been another week of significant soybean exports with the reported volume reaching 80 million bu bringing the season total to 418 million bu. This is slightly lower than last season’s same date total but has triggered further upside in CBOT soybeans which have closed above the 50 day moving average (basis Jan ’14) and fund buyers have latched onto this as a potential buy signal. Time will tell as to whether this will create further follow through buying.

• There has been a suggestion that the huge flotilla of soybean cargoes heading towards China, due to arrive within around four weeks, will overwhelm and spark some cancellations, renegotiation or wash-outs, which will have a negative impact on the market. This will be a significant event, should it materialise and we will be keeping a close eye on any signs of it happening.

• Today has seen Goldman reduce its forecast for corn and soybean prices for the 2014/15 season. Corn price forecasts were cut $0.25/bu to $3.75, and soybeans forecasts were reduced to $9.50/bu; corn stocks were seen close to 2 billion bu and record soybean acres were expected. Record S American soybean production was also taken into account. The  current rally in corn prices was expected to be short lived according to the release and near term soybean tightness was expected to provide support.

• Stratégie Grains today anticipated additional EU maize imports driven largely by competitive pricing, particularly from Ukraine. Third country imports for 2013/14 were forecast 400,000 mt higher at 10 million mt, which compares with 11.4 million mt a year ago.

• A number of commentators share our view of forthcoming price downside and suggestions that a price “top” is forming which will only be negated by adverse S American weather conditions. Given the outlook for global stock rebuild which is in progress the downside looks greater than any upside risk right now.

• Monday dawned and closed in a post-WASDE lethargy with volumes low in Paris and London and little in the way of fresh input to spark things into activity.

• Chicago saw both soybeans and corn continue Friday’s positive tone, corn being triggered by short covering and soybeans by profit taking. The slight rally has triggered some farmer selling and it appears that consumers have been dipping into the market “just in case” we have made seasonal lows.

• It remains our view that the current rise in prices will create a selling opportunity and over time we will see lower levels.

• At last the day has dawned, the USDA will unveil “Super WASDE” at 5pm UK time today, the first such report since September – hence the title. The big question is, “what will it contain?” If trade this week is anything to go by, it seems that the trade is expecting a large US corn crop as the market has made a succession of new contract lows (basis Dec ’13 contract). To counter this, the net fund short position can only be described as huge, and, as we have mentioned previously, anything other than confirmation of trade expectations could well see an upward hike in prices. On the other hand if the report confirms the trade view, we are unlikely to see a further big move downward as the crop size is already priced in.

• Soybeans this week (basis Jan ’14 contract) hit their lowest level since mid-August, coming close to filling an open chart gap, before rallying Thursday making some strong gains as shorts took cover ahead of the report and in the midst of further strong US weekly export sales data. The strong pace of both domestic crush demand as well as exports, which will potentially limit closing stock levels, tempers anticipation of a larger soybean crop. S American soybean output potential continues to improve with another record crop in prospect, which is weighing on deferred prices.

• In wheat, US prices have continued to be pressured as global weather conditions continue to be viewed as beneficial. Concerns that previously existed over weather-delayed plantings in Ukraine and Russia have all but disappeared as Ukraine this week reported winter plantings to be complete and Russia not far behind. The outlook for global wheat supplies in the coming season would appear to be pretty good.

• In terms of other news this week, the US Food & Drug Administration (FDA) proposed a ban on artificial trans-fats in processed food products. Their decision was based upon such fats being considered responsible for unnecessary deaths from heart disease. The market reacted to the news with soybean oil prices dipping sharply before recovering some of their losses. The timing of implementation of such a ban, if approved, is not known at this time.

• Egypt returned to the tender market once again as anticipated, and purchased 60,000 mt from Romania for early Dec ’13 delivery. Their decision on 10 October to “pass” on any purchases, as prices were “too high” has clearly backfired somewhat as their most recent purchase this week has cost close to $7.00/mt more than the earlier offers. It is gratifying to see that it is not only ourselves who make poor trading positions, but we are pleased ours are not quite as public as GASC’s!

• Brussels continued the trend of large weekly export licences with 494,286 mt bringing the season total so far to 9.874 million mt. This is 3.404 million mt (52.6%) ahead of the same time last year.

• In front of the USDA’s figures later today, we have seen Brazil’s CONAB estimating their 2013/14 corn crop higher at 78.5 to 79.8 million mt, an increase from 78.4 to 79.6 million mt last month. The soybean crop was also forecast higher at 87.9 to 90.2 million mt, which was up from last month’s 87.6 to 89.7 million mt. Private forecaster Michael Cordonnier has also estimated Brazil’s soybean crop at 90 million mt.

• In summary, the market is anticipating this afternoon’s report perhaps with something of a more optimistic frame of mind as the current evidence would suggest that global stock building is actually under way – at last!

• CBOT corn and wheat closed lower with the soybean closing a touch higher today. Movement was limited in fairly subdued trade ahead of Friday’s report. Once again we saw Dec ’13 corn making fresh lows as it grinds ever so slowly lower as harvest progresses.

• Egypt announced that it had secured another 60,000 mt of wheat, once again from Romania, interestingly its decision to “pass” on their last tender on 10 October because prices were “too high” did not pay off. They paid almost $7.00/mt more than was offered in their last tender, which just goes to prove that we can all make incorrect trading decisions!

• Lanworth, the Reuters forecasting arm, today released its latest estimates of corn and soybean output. Global corn production for 2013/14 was estimated at 958 million mt, an increase of 3 million mt month on month whilst global soybean production was 2 million mt higher at 290 million mt. US figures were forecast at 13.95 billion bu for corn which translates to a yield of 157.5 bu/acre, and soybean output was 3.293 billion bu and 42.8 bu/acre.

• There is little in the way of fresh news and we continue to interpret the longer term market direction as lower in the light of potentially favourable global crop conditions and prospects which point towards higher stock figures. We would be delighted to have our opinion confirmed by the USDA on Friday!

• It has been a day of losses both sides of the “pond” as buyers failed to put in an appearance today! Maybe yesterday’s corn low, its lowest in some 38 months, in front of a potentially huge US corn crop and the prospect of growing end stocks has finally hit home and the buyers have put up the “closed for business sign! We think not and suspect that some short covering rally will materialise before Friday’s report.

• In soybeans despite strong demand, particularly from China, it is difficult to argue against bearish fundamentals. We could be facing an increase of some 2 to 4 million mt in the US crop over the September USDA report, which was 85.7 million mt. Also, in S America the soybean outlook is certainly favourable right now with the possibility that early suggestions of a 10 million mt increase over the 2013 crop are likely to be exceeded if conditions do not deteriorate.

• Technical indicators are also looking far from bullish right now with some chartists becoming quite excited over the prospect for lower prices. Friday’s report, if it runs the way people are talking, I.e. bigger crops, it could be sufficient to trigger further technical selling.

• US corn was reported to be 73% harvested, above the trade estimate of 71% and up from 59% week on week. Soybeans were reported to be 86% harvested, close to the estimated 87%, and up from last week’s 77%.

• Egypt’s GASC issued a tender to purchase wheat for early Dec ’13 shipment, as expected, and results should be known by later tomorrow.

• CBOT grains (corn and wheat) as we approach the close are trading a touch lower today whilst the soybean complex is making some gains although the front month premium is somewhat lower than has been the case in recent days.

• We are in the week of “the report”, having had a two month gap since September’s release, and trying to peg where the market believes yield will be reported is not easy. Soybeans at 43 bu/acre and corn at 162 bu/acre seem to be somewhere close to trade consensus and variation by the USDA higher or lower is likely to provide some interesting price reaction on Friday. Regrettably, once again, Europe will be in the pub with a well earned gin and tonic by the time the report is published at 5pm (UK time) and we will have the whole weekend to digest the data before (possibly) playing catch-up with the US.

• Given the extent of US soybean demand, both domestic and export, it will be important for soybean yield to reach the 43 bu/acre mark otherwise we will be staring at a demand rationing price rally, possibly of some magnitude. China remains a keen buyer of US soybeans as their crush margins remain positive and US quality is high.

• The weekend saw Saudi Arabia purchase 720,000 mt of wheat from the EU, US, S America and Australia for delivery Jan – Mar ’14. Quality specification called for a minimum 12.5% protein content. It is believed that Egypt will return to the tender market prior to the USDA report on Friday. It has been interesting today that this wheat information has not created more support to the market.

To download the weekly update as a PDF file please click on the link below:

Weekly Update 1 November 2013